By Greg Farrell in New York and Jenny Wiggins in London
Published: January 21 2010 19:10 | Last updated: January 21 2010 19:10
Hershey has decided not to mount a bid for Cadbury, abandoning its hope of using the British confectioner as a path to global expansion and conceding that Kraft’s recommended bid of 840 pence per share, plus a 10 pence dividend, is too high for it to top.
The decision follows a unanimous vote by Hershey’s board of directors late on Wednesday against a competing offer, according to a person briefed on the matter.
While Kraft’s bid, announced on Tuesday, was widely expected to carry the day with Cadbury – in spite of complaints in British government circles about the American takeover of a beloved English brand – the threat of a competing bid from Hershey remained, and the Pennsylvania company had until next Monday to tender its own offer under UK takeover rules.
The decision by the board of Hershey Food ends four months of debate within the company and at the charitable trust that controls the majority of its voting shares.
Since September, when Kraft’s original takeover bid for Cadbury was rebuffed by the UK company as “derisory”, members of the Hershey trust have supported a bid for Cadbury.
Over several months, Hershey’s board came to embrace the idea of a bid, which had been approved just last week. However, the recommended offer by Kraft increased Hershey’s difficulties in putting together a counter-bid.
As well as having to trump Kraft’s offer, Hershey would have had to pay a £118m break fee and go through a long regulatory process in the US that would have delayed the completion of any deal.
A Hershey offer would also have probably included a greater proportion of stock than Kraft’s offer, which ended up being 60 per cent cash.
By offering a large chunk of cash, Kraft has eliminated the need for a shareholder vote – indeed Kraft’s largest shareholder, Warren Buffett, has said that he would not approve the deal if he were given the opportunity to vote.
Kraft now only needs to get the approval of 50 per cent of Cadbury’s shareholders, who must vote by February 2, to succeed.
Although some Cadbury shareholders have expressed disappointment that the company’s board did not get a higher price, most are expected to approve the deal.
Italy’s Ferrero is also expected to withdraw formally as a counter-bidder before a UK Takeover Panel deadline for counter-offers on Monday.
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